Written By: R. Krause
Published On: May 12 2000
In April Intel Corporation announced it will merge its Architecture Business
and Microprocessor Products groups into a new division.
Gelsinger, discussed the changes in an interview following his keynote
address at Windows Hardware Engineering Conference (WinHEC) in New Orleans.
With the reorganization, Pat Gelsinger, vice president and general manager
of Intel's desktop products group, will assume the title of chief technology
officer and will oversee product implementations across all business groups.
Intel said it would release further details of the reorganization later.
"We've been seeing the need for these actions for a while," he said. "We've
been orienting our programs more to delivering solutions, put in place
the processes to better communicate with our customers and align our roadmaps.
We've been addressing those issues through incremental process and organizational
improvement. I think it now became very clear that this is the way of
has been unable to produce sufficient supply to match the demands of its
major customers, especially for the Celeron and Pentium III processors.
In February, Intel said it was ramping up its production and predicted
it would be able to meet supply needs by the end of the first quarter,
but early in April company officials pushed back that timetable to June.
Intel has blamed the problems on a combination of unexpectedly high demand
and lousy forecasting by industry analysts. Other analysts also believe
Intel's efforts to become a networking powerhouse have contributed to
its taking its eye off the ball.
Given all the apparent missteps Intel has made in the last year, we expected
something like this to happen - we just expected it sooner. Intel still
has 80+% of the market, to AMD's 17%, but AMD's string of successes has
got to be making Intel CEO Craig Barrett a little nervous. Reorganizations
typically mean that a company spends six to nine months trying to get
their "ducks in a row" - getting everyone marching in the same direction
- and we do not expect Intel to be any different. Advanced Micro Devices
CEO Jerry Sanders must be loving this, but we do not expect him (nor AMD)
Looking at the overall market, we do not expect this move to increase
market growth. Any growth in markets that occurs will be due to external-to-Intel
market forces. We expect AMD to increase their market share at Intel's
expense. Market consolidation is not an issue, because there are only
two players left.
Intel loyalists should be (tentatively) happy about this announcement,
because it means that Intel has finally started moving to remedy whatever
problems might be present. There will probably still be some firefighting,
but we expect that to diminish over time.
expect this announcement to affect other users in a key way. Many of Intel's
recent problems have been related to undercapacity, i.e., the inability
to meet the demands of the marketplace. Although many companies would
love to have this problem (vs. lots of supply and no demand), Intel's
reputation and business has suffered because they apparently just didn't
plan well enough to have a contingency plan ready to roll. We expect undercapacity
to be an issue for a few months longer, and the reorganization will exacerbate
this. This means the bigger customers will probably pull strings to get
their needs met, and so smaller customers will get squeezed.
may want to verify that Intel's capacity problems will not affect their
orders. If there is a negative affect, they may want to consider other